NY TSB-A-24(22)S Sales Tax 2024-08-02

Are a veterinarian's purchases of blood products (red blood cells, plasma, cryoprecipitate) for use in surgery exempt from New York sales tax?

Short answer: Exempt only for farm use. The Department concluded that a veterinarian's blood products (red blood cells, plasma, cryoprecipitate, cryopoor) are 'drugs and medicines' that are exempt from sales tax under Tax Law § 1115(f)(2) ONLY when used in veterinary services on livestock or poultry used in the production for sale of tangible personal property by farming. For other animals — like the practice's typical dog and cat patients — the blood products are taxable. The vet can buy exempt with Form ST-125; if use is unknown at purchase, pay tax and claim a refund on Form AU-11.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

A New York veterinary surgical hospital buys blood products — red blood cells, plasma, cryoprecipitate, and cryopoor — for use in surgery. Its patients are mostly dogs and cats, but it treats all kinds of animals. It asked whether those purchases are subject to New York sales tax. The Department concluded they are exempt only when used on farm animals — otherwise taxable.

Generally, a veterinarian's purchases of tangible personal property for use in practice are taxable (20 NYCRR 528.24). But Tax Law § 1115(f)(2) exempts drugs or medicines purchased or used by a licensed veterinarian for use on livestock or poultry used in the production for sale of tangible personal property by farming. The blood products qualify as "drugs and medicines" — the regulatory definition (20 NYCRR 528.4(b)(1), drawn from the Tax Law § 1115(a)(3) human-drug definition) is read into § 1115(f)(2) without the "human use" limitation, since the veterinary exemption isn't limited to human drugs. Blood products affect the structure/function of the animal's body, so they're drugs/medicines.

The catch is what animal they're used on. Used in services on farm livestock or poultry, the blood products are exempt; used on other animals (the practice's typical dogs and cats), they are taxable. To buy exempt, the vet uses Form ST-125 (Farmer's/Commercial Horse Boarding Exemption Certificate). If the vet doesn't know at purchase how the products will be used, it must pay the tax and claim a refund on Form AU-11 for the exempt (farm) uses.

What this means for you

Veterinarians and veterinary suppliers

Most of what a vet buys to use in practice is taxable. The drugs/medicines exemption under § 1115(f)(2) is narrow: it applies only to use on farm livestock or poultry raised for sale (farm production). Treating pets (dogs, cats) doesn't qualify, so blood products and similar items used on them are taxable.

Manage the "don't-know-yet" problem

If you can't tell at purchase whether a product will be used on farm animals or pets, the practical path is pay the tax, then refund the farm-use portion via Form AU-11. Where farm use is known up front, give the supplier a Form ST-125 to buy exempt.

Accountants and tax professionals

The exemption hinges on (1) the item being "drugs and medicines" (528.4(b)(1) read without the human-use limit) and (2) end-use on farm livestock/poultry in production for sale. Track usage by patient type to support ST-125 purchases or AU-11 refunds; the default under 528.24 is taxable.

Common questions

Q: Are a veterinarian's blood products taxable in New York?
A: It depends on the animal. They're exempt drugs/medicines when used on farm livestock or poultry raised for sale, but taxable when used on other animals like dogs and cats.

Q: Why are pets treated differently from farm animals?
A: The § 1115(f)(2) exemption is limited to drugs/medicines used on livestock or poultry used in the production for sale of tangible personal property by farming. Companion animals aren't farm production, so the exemption doesn't apply.

Q: How do we buy exempt or recover the tax?
A: Use Form ST-125 to purchase exempt when you know the products will be used on farm animals. If you don't know at purchase, pay the tax and claim a refund on Form AU-11 for the exempt uses.

Q: Can my business rely on this opinion?
A: Not as binding. A TSB-A advisory opinion binds the Department only as to the petitioner and the exact facts described. Use it to understand the reasoning, then check your own facts.

Citations and references

New York Tax Law and regulations:
- Tax Law § 1115(f)(2) — exemption for drugs/medicines used by veterinarians on farm livestock or poultry
- Tax Law § 1115(a)(3) — definition of drugs and medicines
- 20 NYCRR 528.4(b)(1) — regulatory definition of drugs and medicines
- 20 NYCRR 528.24 — veterinarians' purchases for use in practice are generally taxable

Forms cited:
- Form ST-125 — Farmer's and Commercial Horse Boarding Operator's Exemption Certificate
- Form AU-11 — Application for Credit or Refund of Sales or Use Tax

Source

Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao.htm
Opinion: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales/24-22s.htm
Printer-friendly PDF: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a24-22s.pdf

Original ruling text

Sales Tax
August 2, 2024
Office of Counsel

The Department of Taxation and Finance received a Petition for Advisory Opinion from [ redacted ] (Petitioner) located at [ redacted ]. Petitioner asks whether purchases of “blood products” by a veterinarian for use in surgical procedures are subject to New York State and local sales taxes.

We conclude that such blood products are exempt from sales tax when used by a licensed veterinarian to perform veterinary services on livestock or poultry used in the production for sale of tangible personal property by farming.

Facts

Petitioner operates a veterinary surgical hospital located in New York State. Petitioner’s veterinarians are licensed under the New York State Education Law. Petitioner states that it purchases blood products for use in surgical procedures performed by the practice. These blood products include red blood cells, plasma, cryoprecipitate and cryopoor. Petitioner’s patients are primarily dogs and cats, but they provide services to all kinds of animals needing critical care.

Analysis

Generally, purchases of tangible personal property by a veterinarian for use in the practice of veterinary medicine or performing taxable services are subject to tax. See 20 NYCRR 528.24. However, Tax Law § 1115(f)(2) exempts drugs or medicines, purchased or used by veterinarians licensed and registered as required by New York State Education Law, for use in the practice of veterinary medicine on livestock or poultry used in the production for sale of tangible personal property by farming.

“Drugs and medicines” are defined for purposes of the exemption in Tax Law § 1115(a)(3) as articles other than food used in the diagnosis, cure, mitigation, treatment or prevention of disease in humans, or articles other than food that are intended to affect the structure or any function of the human body. See NYCRR 528.4(b)(1). That exemption is expressly limited to drugs and medicines for human use. The exemption for drugs used by veterinarians in Tax Law § 1115(f)(2) does not include this limitation. While there is no separate definition for exempt drugs under §1115(f)(2), we read the regulatory definition to apply to this section without the limitation for human use.

Here, the blood products Petitioner purchases are used in performing surgical procedures on animals rather than humans. Such products qualify as drugs and medicines because they are used in surgical procedures on critically ill or injured animals and because they affect the structure or function of the animal’s body. If Petitioner uses the blood products in the performance of veterinary services on livestock or poultry used in the production for sale of tangible personal property by farming, such products are exempt from sales tax. Petitioner may use Form ST-125—Farmer’s and Commercial Horse Boarding Operator’s Exemption Certificate. to purchase such blood products exempt from sales tax. Purchases of blood products by Petitioner for use in providing veterinary services to any animal other than livestock or poultry used in farm production do not qualify for the exemption under Tax Law § 1115(f) and are subject to sales tax. If Petitioner does not know at the time of purchase how the blood products will be used, it must pay sales tax and claim a refund using Form AU-11 for any blood products used in an exempt manner.

DATED: August 2, 2024

Mary Ellen Ladouceur
Principal Attorney

Note: An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set forth therein and is binding on the Department only with respect to the person or entity to whom it is issued and only if the person or entity fully and accurately describes all relevant facts. An Advisory Opinion is based on the law, regulations, and Department policies in effect as of the date the Opinion is issued or for the specific time period at issue in the Opinion. The information provided in this document does not cover every situation and is not intended to replace the law or change its meaning.